American Dynamism (with Katherine Boyle)

In this episode of Acquired, hosts Ben Gilbert and David Rosenthal, alongside guest Catherine Boyle, General Partner at Andreessen Horowitz, discuss the venture firm's American Dynamism practice. Boyle, a former Washington Post reporter, shares her journey from journalism to venture capital, emphasizing the importance of investing in companies that support the national interest, such as those in aerospace, defense, education, and infrastructure. Highlighting the decentralization of tech innovation post-COVID, Boyle foresees a future where every VC firm will have an American Dynamism practice, reflecting a shift from Silicon Valley's dominance to a nationwide entrepreneurial landscape. The conversation also touches on the cultural and economic implications of this shift, advocating for a celebration of America's innovative spirit and the creation of a new, distributed middle class through technology.

• Ben Gilbert and David Rosenthal are recording from separate hotel rooms to ensure better audio quality.
• They highlight the complexity added by doing live in-person events.
• They introduce themselves as co-hosts, with Ben being a co-founder and managing director at Pioneer Square Labs and PSL Ventures, and David being an angel investor.

"I think this is our first time doing video in hotel rooms." "And the funniest thing is, David and I are in hotel rooms down the hall, recording in different rooms so we get better audio quality."

The quotes explain the unique recording situation for the podcast episode, emphasizing their commitment to audio quality even when recording from hotel rooms.

• Catherine Boyle, a general partner at Andreessen Horowitz, leads the American Dynamism practice.
• The practice focuses on investing in companies that support the national interest, including those selling directly to the government and those involved in education, housing, transportation, and infrastructure.
• The conversation delves into why these sectors are important for venture investing, technology, America, and Andreessen Horowitz.
• Catherine shares her background as a reporter at the Washington Post and her journey to Silicon Valley and venture capitalism.

"She's a general partner at Andreessen Horowitz, where she leads their American Dynamism practice." "It's everything from companies that sell directly to government, like aerospace and defense, these classic industrial sectors that have been supporting government since the mid 20th century, but then also things that every citizen cares about and takes part of."

The quotes describe Catherine Boyle's role and the focus of the American Dynamism practice, highlighting its breadth and significance across various sectors that impact both the government and citizens.

• Pilot is a partner of the Acquired podcast and is the largest startup-focused accounting firm in the US.
• The company provides comprehensive financial services, including accounting, tax, bookkeeping, and CFO services.
• Pilot's clientele includes notable startups like OpenAI, Airtable, and Scale.
• The service aligns with Jeff Bezos's axiom for startups to focus on what makes their product unique and outsource other functions.

"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs." "Every company needs it. It needs to be done by a professional. You don't want to take any risk of anything going wrong, but at the same time, it has zero impact on your product or customers, things you do uniquely well."

These quotes emphasize the necessity of professional financial services for startups and the strategic advantage of outsourcing non-core business functions, in line with Bezos's business philosophy.

• The thesis revolves around supporting the national interest through technology and innovation in sectors like aerospace, defense, education, housing, and infrastructure.
• Catherine Boyle and Andreessen Horowitz observe a lack of software innovation in these physical spaces over the last 30 years.
• They discuss the challenges and counterarguments to investing in these sectors, including regulatory capture, entrenched interests, and the complexities of working with physical rather than virtual products.
• The conversation touches on the history of Silicon Valley's relationship with government and the potential for technology to improve governmental functions.

"It's companies that support the national interest." "The last 30 years of software really hasn't touched a lot of these physical spaces."

These quotes summarize the core of the American Dynamism thesis, which is to bring technological innovation to sectors that are crucial to the national interest but have been historically overlooked by software advancements.

• Silicon Valley's origins are deeply connected to government investment, particularly in defense.
• There has been a shift in Silicon Valley away from working directly with the government due to perceived procurement difficulties and a focus on other areas of innovation.
• Catherine Boyle's background in Washington, D.C., provided her with a perspective on the importance of government-related markets and the potential for Silicon Valley to contribute positively.
• The discussion includes examples of companies like SpaceX and Palantir that have successfully bridged the gap between technology and government needs.

"Silicon Valley was built on defense investment." "Silicon Valley has never touched government."

These quotes reflect on the paradoxical relationship between Silicon Valley and government, where the initial growth of the tech sector was fueled by defense investment, yet modern Silicon Valley often distances itself from governmental collaboration.

• The COVID-19 pandemic has highlighted the need for technological innovation in government and civic goods.
• Government agencies often operate with outdated technology, contrasting with the private sector's modern tools.
• The conversation explores the potential for technology companies to take on roles traditionally held by the government, such as in transportation and healthcare.
• The speakers discuss the trend of government outsourcing and the use of private sector software to improve efficiency and reduce costs.

"The world fundamentally changed with COVID." "The government has not realized that in terms of how it procures software."

These quotes capture the sentiment that the pandemic has been a catalyst for reevaluating the relationship between government functions and technological innovation, with an emphasis on the need for modern software solutions in government procurement.

• Traditional sectors like education, healthcare, and manufacturing have been slow to adopt technology.
• These sectors are deeply tied to the physical world and cannot be transformed through virtual means alone.
• The thesis that "software is eating the world" suggests that these sectors are the final holdouts to technological disruption.

"We can talk about classic regulatory capture, but it is also this idea that none of those sectors use technology yet." "It's such a massive holdout, but it's something where it's like it is deeply tied to the physical world."

The first quote emphasizes the lack of technology use in traditional sectors and the concept of regulatory capture, where industries are controlled by the entities they are supposed to be regulated by. The second quote highlights the sectors' significant potential for disruption and their intrinsic connection to the physical world.

• Success in investment is not just about being correct, but also being non-consensus and correct.
• Timing (the 'why now' factor) is critical for the success of an investment thesis.
• The COVID-19 pandemic has played a significant role in creating the right conditions for change in traditional sectors.

"There's being correct. There's being non consensus and correct, but then there's also getting the timing right, the why now?"

This quote outlines the three components necessary for a successful investment thesis: correctness, non-consensus, and timing. It stresses the importance of understanding the current moment's unique conditions that make an investment opportunity ripe.

• Silicon Valley's talent pool has diversified beyond traditional engineers and computer scientists.
• The culture of Silicon Valley has shifted, with people from various backgrounds, including government and education, starting technology companies to solve real-world problems.
• The social network movie influenced many to pursue entrepreneurship, changing the perception of who can be a founder.

"Silicon Valley is an idea, not a place state of mind."

This quote reflects the broader concept of Silicon Valley as a mindset focused on innovation and counterculture, not just a physical location.

"The myth of Silicon Valley hit everyone really hard to where the culture and the counterculture merged."

This quote discusses the impact of Silicon Valley's mythos on broader culture, leading to a convergence of mainstream culture and the once countercultural tech scene.

"They're not the normal people we would say are the founders of ten years ago."

This quote highlights the changing profile of founders in Silicon Valley, with a more diverse array of backgrounds now represented.

• Films like "The Social Network" and characters like Gordon Gekko from "Wall Street" have inspired many to enter industries they portray, despite being cautionary tales.
• Popular media can influence cultural aspirations and career choices, contributing to shifts in industry dynamics.

"It's true, like a lot of these movies, there's always a question of, do they create the myth, or are they responding to the myth?"

This quote suggests a reciprocal relationship between media portrayals and cultural myths, where media can both reflect and shape societal aspirations.

• There's a concern that Silicon Valley may have become too institutionalized, attracting bureaucrats rather than innovators.
• Market corrections and economic downturns can lead to innovation as companies are forced to rethink strategies and adapt to new conditions.

"Do you think Silicon Valley has so much infrastructure now that it is attracting the 90s NASA people instead of the 60s NASA people?"

This quote questions whether Silicon Valley's growth and institutionalization have made it less attractive to the pioneering spirits who once flocked there.

"Markets are self correcting in that respect."

This quote suggests that market dynamics naturally correct imbalances, such as an excess of bureaucracy, by favoring innovation during challenging times.

• Catherine Boyle's transition from journalism to venture capital reflects broader cultural shifts towards technology and innovation.
• Boyle's decision to leave a struggling industry for Silicon Valley was influenced by a recognition of technology's growing impact on society.
• The changing media landscape has altered the role of journalists and the relationship between media and technology.

"I was convinced I was going to be fired. It was a terrible, terrible time to be in journalism."

This quote provides personal context for Boyle's career change, highlighting the difficult circumstances in the journalism industry at the time.

"I was a style section reporter at the Post."

This quote identifies Boyle's role at the Washington Post, which was focused on culture and allowed for creative writing.

"People often ask me, they're like, what's the connection between venture capital and journalism?"

This quote introduces the topic of similarities between journalism and venture capital, such as the pursuit of cultural shifts and the identification of emerging trends.

• The role of media has evolved, with journalists now often seen as activists with a mission to change culture, rather than neutral reporters of facts.
• The rise of social media, particularly Twitter, has significantly impacted journalism and the way news is reported.
• Platforms like Substack have capitalized on the trend of individual journalists becoming powerful personal brands, overshadowing traditional media institutions.

"The world of media has completely changed since I was a journalist."

This quote acknowledges the profound changes in the media industry since Boyle's time as a journalist.

"The individual journalist is ultimately more powerful than the institution."

This quote reflects on the shift towards individual journalists gaining more influence and audience than the media institutions they work for.

• Catherine Boyle shares her experience working at the Wall Street Journal on the business side.
• She contrasts the traditional journalistic culture with the current media environment.
• Catherine believes starting a career in a declining industry offers a unique perspective on success and failure.

"I think the greatest way that it affected me was I think starting your career off in a dying industry gives you a different perspective than if you start your career off in a company that is just filled with abundance."

Catherine reflects on how beginning her career in journalism, an industry perceived as dying, shaped her understanding of business dynamics, contrasting it with the experience of starting in a thriving company.

• Catherine discusses the impact of a scarcity culture, such as that in Washington, D.C., on decision-making and risk-taking.
• She contrasts this with the abundance culture in Silicon Valley, which fosters a different approach to innovation and collaboration.
• The discussion includes the notion that a scarcity culture leads to zero-sum thinking and short-term cycles due to political turnover.

"And an abundance culture leads to. Yes, it leads to. Oh, yeah, try that."

Catherine explains how an abundance culture, like that in Silicon Valley, encourages experimentation and the pursuit of new ideas, which is less prevalent in scarcity-driven environments.

• Catherine and Ben Gilbert discuss how Washington, D.C., operates on a currency of power, which is scarce and hierarchical.
• They compare this to Silicon Valley, where equity, money, and success are more prevalent currencies, allowing for multiple winners.
• Catherine highlights the contrast between venture capital and other asset classes like private equity and hedge funds.

"Power is scarce, and it is extremely hierarchical."

Catherine emphasizes that in Washington, D.C., power is the primary currency and it is limited, leading to a competitive and hierarchical environment.

• Catherine argues that venture capital is about creating new things and solving problems, which is fundamentally different from private equity and hedge funds.
• She stresses the importance of building and growing companies, which is a key driver in Silicon Valley.
• The conversation touches on the misconception of lumping all asset classes together.

"Venture capital is creating new things from nothing."

Catherine describes venture capital as the process of creating new businesses and opportunities, distinguishing it from other financial activities focused on existing entities.

• The speakers discuss regional attitudes toward success and wealth, comparing Silicon Valley, Miami, and Seattle.
• Catherine notes that Miami celebrates success openly, while Silicon Valley and Seattle are more reserved.
• The conversation explores the pride founders take in their creations and the cultural differences in displaying wealth.

"There's a lot of people in Silicon Valley who build something and then apologize for it, and it's like they're ashamed."

Catherine observes that in Silicon Valley, there is a tendency for successful individuals to downplay their achievements, unlike in Miami where success is celebrated more openly.

• Catherine introduces the concept of American Dynamism, which includes the spread of Silicon Valley's entrepreneurial spirit across the country.
• She discusses how the COVID-19 pandemic has accelerated the decentralization of tech, allowing founders to build from anywhere.
• Catherine shares an example of Flock Safety, a company based in Atlanta that exemplifies this trend.

"Silicon Valley could be exported to the rest of the country. I mean, that will be game changing."

Catherine expresses optimism that the ethos of Silicon Valley can be adopted by entrepreneurs nationwide, leading to innovation and economic growth throughout the country.

• Catherine and Ben discuss how the pandemic has changed the way investors and founders connect and build relationships.
• They consider the shift from in-person networking to forming communities and conducting business online.
• Catherine shares her experience with Hadrian, a Los Angeles-based company, as an example of remote investment and relationship management.

"Covid led to this sort of rebirth of actually, you could build relationships online."

Catherine notes that the pandemic has normalized online relationship building, which has become integral for business and investment practices.

• The speakers explore the changing landscape for startups seeking venture capital.
• Catherine describes the pre-COVID expectation for startups to relocate to Silicon Valley and how this is no longer the case.
• She emphasizes the growing acceptance and success of companies based outside traditional tech hubs.

"The number of new companies we are going to see sprout up in second and third cities across America... I don't even think it has to be really big cities."

Catherine predicts a wave of new startups emerging from a variety of locations across the United States, thanks to the remote work movement and changing perceptions of where successful companies can be based.

• A founder identified the need to create new machine shops with automation in the United States.
• Upskilling American workers to become technically competent machinists without requiring artisan knowledge.
• The founder's company is now serving large aerospace and defense companies, particularly in the new space sector.
• The success of this company is seen as critical to the hardware industry's ability to get parts delivered efficiently.
• The company is an example of an immigrant founder tackling significant American problems and is located in Los Angeles, a hub for defense and aerospace.

"So we actually returned capital to his investors and said, this is not feasible from a private equity standpoint or with existing shops. And we have to build new machine shops with automation, and then we have to upskill American workers so that they can do this type of work."

This quote explains the strategic pivot from traditional private equity investment to a focus on building new, automated machine shops and upskilling the workforce to meet the demands of modern manufacturing.

• There's a shift in perspective on the value of working with one's hands and vocational training.
• The narrative that college education is the only path to success is being challenged.
• Companies like Hadrian are emblematic of this shift, valuing practical skills and contributing to the startup revolution.

"You are upskilling a generation of people who were told that working with their hands was embarrassing, who were told that they had to go to college and they had to read Kant."

The quote highlights the company's mission to change the societal perspective on manual work and vocational education, promoting the value of upskilled labor in modern industries.

• The creator economy is leading to a small business revolution enabled by technology.
• The focus of investment is shifting from large tech companies to small tech startups aiming to solve big problems.
• There's a trend toward decentralization and a growing number of individuals and small businesses are using online platforms like Substack and Shopify to build successful ventures.
• The venture capital model is deeply intertwined with the American story of innovation and opportunity.

"Small tech is actually the thing that gets me excited. It's the fact that I invest in early stage companies. I invest in companies from the napkin stage. And those are small businesses."

This quote emphasizes the speaker's enthusiasm for investing in early-stage, small tech companies that have the potential to grow and make a significant impact on the economy and society.

• The concept of "American dynamism" is about investing in companies that are innovating to solve the country's biggest problems.
• There's a belief that in the future, all venture capital firms will have an American dynamism practice, focusing on investments that drive national innovation.
• The goal is to spread the incentive alignment and innovation ecosystem across the entire country, not just Silicon Valley.

"I think if we do our jobs right and we invest in the companies that we're intending to invest in, and we tell the story right, I think every venture capital firm will have an American dynamism practice."

This quote conveys the speaker's vision for the future of venture capital, where firms across the country will focus on investing in companies that contribute to American innovation and prosperity.

• Defense is a sector that has become increasingly important, especially in light of global conflicts like the situation in Ukraine.
• Modern defense contractors, built with contemporary technology, are essential for national security and international stability.
• Investments in such companies may be contrarian but are seen as necessary and ultimately vindicated by unfolding world events.

"It was so clear that people were going to change their minds about the company. And it's just extraordinary to see. It has grown tremendously over the last five years."

The quote reflects the speaker's conviction in investing in modern defense technology and the belief that the importance of such investments would become evident over time.

• The United States is viewed as the greatest human experiment, with a history of immigration and opportunity.
• The venture capital model and Silicon Valley's story are deeply American narratives.
• The speaker expresses a desire to see the model of innovation and venture capital spread throughout the entire country.

"I think America is the greatest experiment in human history. The vast majority of Americans come from somewhere else."

This quote encapsulates the speaker's admiration for the United States as a land of opportunity and the embodiment of the American Dream, which is reflected in the venture capital industry and the success of immigrant entrepreneurs.